Asking the right questions about Bain Capital

Mitt Romney sat down with Time’s Mark Halperin yesterday for a pretty long interview, and we learned a few interesting things. For example, for all the Republican hatred of Keynesian economics, the Republican candidate said if he cut a trillion dollars out of the budget in his first year, he’d be “throwing us into recession or depression.”

The former governor also said he can improve the economy through his very existence – “entrepreneurs” will start investing simply by virtue of Romney being in office – and though he wants to increase Pentagon spending and approve tax breaks, we can’t afford PBS.

But Halperin, to his credit, also asked some worthwhile questions about Romney’s controversial private-sector background. “I know you think that working in the private sector in and of itself gives you insight into how the economy works,” the reporter said, “but what specific skills or policies did you learn at Bain that would help you create an environment where jobs would be created?” The presumptive GOP nominee replied:

“Well that’s a bit of a question like saying, ‘What have you learned in life that would help you lead?’ My whole life has been learning to lead, from my parents, to my education, to the experience I had in the private sector, to helping run the Olympics, and then of course helping guide a state. Those experiences in totality have given me an understanding of how America works and how the economy works.

“Twenty five years in business, including business with other nations, competing with companies across the world, has given me an understanding of what it is that makes America a good place to grow and add jobs, and why jobs leave America – why businesses decide to locate here, and why they decide to locate somewhere else. What outsourcing causes – what it’s caused by, rather. I understand, for instance, how to read a balance sheet. I happen to believe that having been in the private sector for twenty-five years gives me a perspective on how jobs are created – that someone who’s never spent a day in the private sector, like President Obama, simply doesn’t understand.”

Reading the transcript, it was at this point when it occurred to me that Mitt Romney is basing his campaign on his private-sector work, but he hasn’t the foggiest idea how that business experience relates to the responsibilities of a president.

Jon Chait argued that Romney’s response to Halperin’s question “is pure incoherence…. Basically Romney is just repeating his premise over and over again. He doesn’t say why his experience as a rich business guy better enables him to craft pro-growth policies.”

It’s because there is no good answer to the question. The premise of Romney’s campaign is burdened by a flaw: it doesn’t make sense.

Let’s say for the sake of conversation that Romney was great at running a private-equity firm. Let’s even assume he was the greatest private-equity investor in the country. Hell, let’s say he was the single greatest private-equity investor in the history of the world.

The question that Halperin, who hardly leans to the left, was getting at is simple enough: So?

Chait added, “Romney insists that his Job Creator experience taught him that energy is part of the cost of a business, so it’s bad to pursue policies that result in high energy costs. But obviously this isn’t some special knowledge that you need to be in the private sector in order to acquire. If you’re the president, businesspeople will be happy to tell you this.”

Romney’s pitch to voters is fairly straightforward: “I’d be a good president because I made wise private-equity investments and generated enormous profits.” There is, however, a disconnect between one and the other: presidents aren’t called upon to make wise private-equity investments and generate enormous profits, making the pitch rather irrelevant.

“[M]y view of private equity is that it is set up to maximize profits. And that’s a healthy part of the free market. That’s part of the role of a lot of business people. That’s not unique to private equity. And as I think my representatives have said repeatedly, and I will say today, I think there are folks who do good work in that area. And there are times where they identify the capacity for the economy to create new jobs or new industries, but understand that their priority is to maximize profits. And that’s not always going to be good for communities or businesses or workers.

“And the reason this is relevant to the campaign is because my opponent, Governor Romney, his main calling card for why he thinks he should be President is his business expertise. He is not going out there touting his experience in Massachusetts. He is saying, I’m a business guy and I know how to fix it, and this is his business.

“And when you’re President, as opposed to the head of a private equity firm, then your job is not simply to maximize profits. Your job is to figure out how everybody in the country has a fair shot. Your job is to think about those workers who got laid off and how are we paying for their retraining. Your job is to think about how those communities can start creating new clusters so that they can attract new businesses. Your job as President is to think about how do we set up a equitable tax system so that everybody is paying their fair share that allows us then to invest in science and technology and infrastructure, all of which are going to help us grow.

“And so, if your main argument for how to grow the economy is I knew how to make a lot of money for investors, then you’re missing what this job is about. It doesn’t mean you weren’t good at private equity, but that’s not what my job is as President.”

The whole argument of late about Bain Capital has been off track. The political world has been debating whether the criticisms represent “character assassination,” whether they’re an attack on “free enterprise,” whether the president is “anti-Wall Street,” etc.

The better argument is less convoluted: what did Romney learn at Bain that would help him in the White House? I don’t know the answer to that, and yesterday, Romney didn’t either.